What Exactly are Adjustable-Rate Mortgages?

Adjustable-Rate MortgagesThe best mortgage rate is never a myth, but rather a favorable figure relative to your situation, according to the City Creek Mortgage. But it doesn’t get simpler at this point; even if you know it exists, you might have trouble finding the interest rate that suits you of the myriad of products offered on the market.

For starters, it pays to know that there are really just two types of mortgages: fixed-rate and adjustable-rate mortgages (ARMs). The former is pretty much self-explanatory while the latter requires a 300-post like this.

So as you embark on your search for the best mortgage rate in Utah — or anywhere else in the U.S. for that matter — you should know first ARMs still comes in different forms.


Most ARMs are actually a combination of fixed and adjustable. They would appear like this: 15-year 3/1. The first digit after the length of the term refers to the number of years the rate is fixed, and then the second digit refers to the number of times the rate would change every year going forward after the initial fixed-rate period.


An interest-only ARM means you get to pay just the interest over a specified period. This keeps your monthly repayment low for the next few years before you have to start paying for the principal amount of your loan. If you have a 30-year with a 3-year interest-only period, your first payment that comprises the principal and the interest would only begin during your fourth year.


Also called an open arm, this type of ARM gives you the liberty to choose how you pay monthly. Among the payment options available includes principal and interest, interest-only, and minimum monthly payment.

An ARM is not for everybody. Even if the mortgage rates have been low the past few years and show no signs of going up down in the foreseeable future, you might be better off with a fixed-rate if you want stability and have no plans of moving within the next decade.